Creating Value from Information Assets

To Facebook, you’re worth about $81. Your friendships are worth $0.62 per connection. Each “Like” or post is worth about $.03. When added up, information generated from your (and all other Facebook users’)  friendships, likes, posts and pages accounted for $68B in Facebook’s planned IPO.

From the WSJ post on how Facebook creates and values information:

The Financial Value of Facebook’s Information Assets

“The value of all the information Facebook collects is in the hinterland between its reported balance sheet book value of $6.6 billion and the anticipated post-IPO market value. Facebook is a pure information-based business; it doesn’t buy, make or sell anything else. Using Facebook’s own conservative valuation of $75 billion, its information value gap is more than $68 billion.

What information has Facebook collected from you and me? Facebook reports it has 845 million Monthly Active Users (“MAUs”) as of December 2011, up from 608 million in 2010 and 360 million in 2009. Facebook claims users punch the “Like” button or post a comment 2.7 billion times per day. Estimates suggest about half of those are “Likes” and half are some form of written content. Based on Facebook’s recent trajectory, this extrapolates to 2.11 trillion pieces of monetizable content collected during the past three years. Facebook’s filing also discloses that it has 37 million pages with 10 or more “Likes,” while other sources indicate Facebook hosts nearly 22,000 business pages. Its 845 million users, each with an average of 130 friends, equates to 109 billion friendships. Facebook’s S-1 corroborates this figure as “over 100 billion friend connections.”

Dividing Facebook’s 2.11 trillion pieces of content into this market-to-book valuation differential indicates that each “Like” you click or item you post will be worth about $.03 to Facebook or its future investing public.

Because Facebook actually generated $3.7 billion on these information assets last year, the realized value of its information portfolio is only 1/20th its investor-anticipated potential. Facebook and its investors plainly expect this gap to be closed through its information monetization capabilities. Information value gaps aren’t unique to Facebook — Google and other information-centric businesses experience the same gaps.”

How is your business creating value from the information you and/or your users generate while using your product?

“Most organizations do not benefit from a global pool of data-churning staff and a pure information-based business model. But to remain competitive, they must continually become more information-centric. This starts with CIOs considering what sources of information are available both internally and externally, envisioning how this information can be deployed in transformative ways, and valuing and managing information as an actual corporate asset.

Want to start finding the answer?   Read just about anything written by Hal Varian including “Information Rules”.

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